Producing green hydrogen flexibly at power stations like Manapouri is a low-cost way to solve Aotearoa's future energy storage needs.

The biggest challenge facing countries moving toward 100% renewable grids and energy systems is how to have energy stored away ready to dispatch when there’s not enough solar, wind or hydro generation to meet demand.  

It’s not just challenging, it’s expensive.  The Australian state of Victoria is proposing a huge lithium-ion battery to support its grid, with an indicative cost of around $300 million.  Here in New Zealand, a pumped hydro project under investigation at Lake Onslow in Otago is forecast to come with a hefty $4 billion price tag. 

Other countries with scarce renewables like Japan and Korea are betting on green hydrogen for their energy storage, which will be used to generate electricity in order for them to reach 100% renewable.

According to Joe Powell, former Chief Scientist - Chemical Engineering at Shell, this presents New Zealand with an opportunity largely unmatched elsewhere in the world to leverage markets for green hydrogen and at the same time provide a low-cost solution to meeting our own future domestic energy storage needs.

Joe Powell

Powell says this comes down to the significant amount of renewable electricity that will become available when the Tiwai Point smelter closes, and the flexibility of green hydrogen production.   

“Having that hydro power superimposed on your other renewables really gives you a unique opportunity to use the market as essentially your de facto storage and not have to pay for new storage, which is really pretty clever,” Powell says.  

It works like this: during a dry-year, hydro lake inflows diminish which puts pressure on the electricity system.  As the country moves closer to a 100% renewable grid, this problem will be accentuated.  Rather than solve this problem with a lot of new expensive storage, a green hydrogen production facility built to replace the Tiwai Point smelter load, would simply reduce production of green hydrogen during dry years, thereby providing an opportunity to redirect South Island hydro generation to the broader domestic electricity grid.

By combining two variable market opportunities - green hydrogen production and dry-year domestic electricity supply, incentives would exist to produce hydrogen at times of strong renewable output, and to feed power as needed into the grid during dry-years. 

“It becomes a matter of ‘am I going to be producing hydrogen out of that resource or am I going to be using the electricity domestically?’, that sort of flexibility gives you a low-cost solution to solve a large proportion of New Zealand’s dry-year problem. 

“This is a lot less costly than having to store all of that energy yourself for dry-year cycles, because you're either keeping or selling your excess.  And that's always a good situation to be in,” Powell says. 

Modelling from McKinsey & Co suggests that flexible production of green hydrogen in Southland has the potential to solve up to 40% of the dry year problem to the benefit of New Zealand’s energy system.  

“Producing green hydrogen flexibly is a low-cost way to solve much of the intermittency of New Zealand’s renewables and to have the stored energy available for when you need it.  

“This puts New Zealand in a far better position than countries without that flexibility, who face costly and difficult paths ahead to reach 100% renewable energy,” Powell says.

Joseph B. Powell (PhD) is Fellow and former Director of the American Institute of Chemical Engineers and was formerly Shell’s Chief Scientist - Chemical Engineering.